Regulation

Wage Deflation

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Over the past few years, "living wage" ordinances have gained popularity throughout the country. Such laws require businesses that have public-sector contracts or that receive economic development incentives to pay workers several dollars above the minimum wage. They are in place in at least 37 jurisdictions and have been proposed in about 70 more.

But the recent defeat of a living-wage law in Montgomery Country, Maryland, just outside of Washington, D.C., suggests that when the negative economic effects of such legislation are made clear, even politicians quick to score p.r. points can do the right thing. In June, developers who had received a tax abatement to redevelop downtown Silver Spring went ahead with their $325 million project only after receiving assurances from the county council that a proposed living wage bill would not affect them.

Montgomery County Executive Douglas M. Duncan led the fight against the proposal, worrying that the law would make it too expensive for firms to do business in the county or that they would simply tack the higher labor costs onto their bids, effectively getting the county to pay the increase. When the living wage proposal came up for a vote in July, a majority of the nine-member council voted it down.

Those voting against the bill included Steven A. Silverman, an at-large Democratic member of the county council, who had signed campaign pledges in favor of a living wage ordinance. Explaining his switch to The Washington Post, Silverman said, "When I signed on to this, I was under the impression that the costs would fall on the private sector."

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